In the 1990s, a few Cassandras warned California and other states that the states' pension obligations were unsustainable. The U.S. would be a lot better off today if state leaders had listened.
Now it's happening again: In Minnesota, the respected Citizens League said this week that the state simply must change the way it pays for nursing homes and other forms of long-term care.
The state's Medicaid program -- the default program for people who have "spent down" their assets -- already pays more than a billion dollars a year for long-term care. That's on track to grow to $5 billion a year in the next 25 years.
"Unless we all agree to massive tax increases to pay for one another's long-term care, Medicaid as the fallback is unsustainable," the report states.
Now, let's cut to the chase: the report's solutions.
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They're worth reading in full at the Citizens League's web site, www.citizensleague.org . And North Dakotans, take note: This is a North Dakota as well as a Minnesota issue. The Citizens League's findings and recommendations essentially apply to all states, not just Minnesota.
But in brief, the report says this:
"The current structure of Medicaid contains disincentives for personal responsibility. Consequently, its function as a safety-net for long-term care for the elderly poor has been distorted.
"Medicaid has been dubbed 'a public insurance with an extremely high deductible' (i.e., virtually all of one's assets). We recommend that it become a type of co-insurance, with eligibility for co-insurance contingent on: 1) privately purchased long-term care insurance and/or savings for long-term care; and 2) income."
Once Medicaid is thought of as a co-insurance plan rather than an insurer of last resort, it becomes easier to design programs that encourage people to buy long-term care insurance.
But as an additional incentive, Medicaid should be made an even less attractive option than it is today, probably by insisting that long-term care patients spend down the equity in their home -- large amounts of which currently are exempt -- before becoming eligible for Medicaid.
Second, follow up on the above by authorizing a much wider variety of private long-term care policies. Third, make sure those policies are well publicized, widely available and easy to understand.
And fourth, the state should promote a number of other savings vehicles to encourage people to save for their own retirements.
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For example, eight Michigan credit unions launched the "Save to Win" program as a pilot project in 2009.
"The concept is simple," the Citizens League report states.
"A saver creates a credit union savings account, and for every $25 saved is entered into a drawing for prizes. Small monthly prizes are awarded by each credit union, and a grand statewide prize of $100,000 is offered annually.
"In eleven months, over 11,500 people opened accounts totaling $8.5 million."
Paying for long-term care is a challenging public policy issue. Challenging -- but not impossible, as the Citizens League has shown. The league's recommendations are a terrific start.
-- Tom Dennis for the Herald
